Upping sales and profits means creating "must haves" that define new categories or subcategories
Posted on Harvard Business Review: May 20, 2011 8:30 AM
The only real way to grow sales and profits is to create innovative offerings with some "must haves" that define new categories or subcategories for which competitors are not relevant. The goal is not only to find and successfully introduce such offerings but to create barriers that inhibit or prevent competitors from entering and becoming serious customer options.
The firms that have enjoyed years or even decades of life with no or weak competitors have created such barriers. Here are some twelve routes to real barriers the last six of which involve the brand. I would be interested in examples of others.
* Proprietary technology. Diamond's (formerly P&G's) Pringles, Prius' Hybrid Synergy Drive, and Dreyer's Slow Churned Ice Cream all have technologies not easily copied.
* Ongoing innovation. Becoming a moving target as Apple did by following the iPod with products like the nano, shuffle, and iTouch, and Gillette did with razors from the Trac II to the Fusion ProGlide. Chrysler went for 18 years without a serious competitor in the minivan category it created in part with innovations like sliding driver side doors, swivel seats and removable back seats.
* Scale. IKEA, Starbucks, eBay, and Apple's iPod all have scale economies often based on first mover status that provide ongoing competitive advantages.
* Investment. A high investment protected brands like CNN, ESPN, and Kirin's Ichiban for many years.
* Execution. Zappos.com with its Wow! experience, its culture celebrating weirdness, and its 24/7 call center that will even find an open pizza shop presents a high bar.
* Brand networks. Supporting networks such as the Apple App suppliers and the Pampers' links to organizations involved in raising babies and keeping them healthy can be hard to duplicate.
* Customer involvement. Some brands can organize a community around the brand as Harley-Davidson has done with their Trip Planner and General Mills has done with the Betty Crocker Kitchen. Others can associate with a common interest such breast cancer research (Avon), creativity (Sharpie), or outdoor hiking (Columbia).
* Self-expressive benefits. Functional benefits are often quickly copied; it is much harder to copy self-expressive benefit such as those offered by Prius. A driver of a Focus may or may not be driving a hybrid but there is no such doubt about a Prius driver
* Brand equity. Muji, Zipcar, PowerBar, and Enterprise Rent-A-Car all have strong brands with visibility, associations, and a sense of authenticity.
* Brand loyalty. If a brand can capture the customers most likely to value the "must haves" and can keep them involved and happy, competitors will be faced with less appealing segments on which to build a business.
* Branded differentiators. A branded feature, service, program, or ingredient that will define a "must have" such as the EarthGrains Eco-Grain, Aquos' quad pixel, Weston's Heavenly Bed, Oral B's Action Cup, or Amazon's OneClick can be owned by the firm.
* Exemplar status. If the brand represents the category such as Fiber One, iPhone, Whole Foods Market, Geek Squad, or Jeep then other brands will have a difficult time getting considered.
These barriers can inhibit competitors from getting traction, becoming visible, and being perceived as authentic or credibility. As a result, they may be weak players for a long time. Even better, they may be discouraged from entering in the first place. To paraphrase Bruce Henderson, the founder of BCG, "the essence of strategy is to convince competitors not to invest in areas of strategic importance to you." It really is a different way to look at strategy. Don't try to beat competition but, rather, make them irrelevant and discourage them from even competing.